- AUD/USD clinched new two-month lows near 0.6500.
- The Aussie dollar keeps looking to commodities and China.
- The pair lost nearly 3 cents in the last two weeks.
The AUD/USD continued its significant multi-day decline on Thursday, extending the recent breakdown of the key 200-day SMA (0.6585) and reaching new two-month lows near the 0.6500 level. Furthermore, spot gave away nearly 3 cents since July peaks near 0.6800 the figure (July 11).
The recent pronounced reversal erased its monthly gains due to poor economic prospects from China, declining commodity prices, intermittent US Dollar (USD) strength, and the recent interest rate cut by the People’s Bank of China (PBoC).
On the latter, the PBoC's unexpected rate cuts earlier in the week weakened the Chinese yuan, adversely impacting the Aussie dollar because of Australia's economic ties with China and the AUD's use as a liquid proxy for the yuan.
Additionally, persistent weakness in copper and iron ore prices contributed to the AUD's decline, mirroring a broader downturn in the commodity sector.
Regarding monetary policy, the Reserve Bank of Australia (RBA) maintained a hawkish stance at its latest meeting, keeping the official cash rate at 4.35% and showing flexibility for future decisions. Subsequent meeting Minutes indicated officials considered another rate hike to curb inflation but refrained, partly due to concerns about a potential sharp slowdown in the labour market.
All in all, the RBA is expected to be the last G10 central bank to begin cutting interest rates. Indeed, the central bank is not in a hurry to ease policy, anticipating that it will take time for inflation to consistently fall within the 2-3% target range.
Potential easing by the Federal Reserve (Fed) in the medium term, contrasted with the RBA's likely prolonged restrictive stance, could support AUD/USD in the coming months. However, slow momentum in the Chinese economy might hinder a sustained recovery of the Australian dollar as China continues to face post-pandemic challenges, deflation, and insufficient stimulus for a convincing recovery.
AUD/USD daily chart
AUD/USD short-term technical outlook
Further losses in the AUD/USD may find first support at the July low of 0.6513 (July 25). From here, the May low of 0.6465 comes next prior to the 2024 bottom of 0.6362 (April 19).
Occasional bullish surges, on the other hand, could face early resistance at the key 200-day SMA of 0.6585, seconded by the temporary 100-day and 55-day SMAs at 0.6606 and 0.6662, respectively, before the July top of 0.6798 (July 8) and the December peak of 0.6871.
Overall, the outlook for AUD/USD should shift to bearish while below the 200-day SMA.
The four-hour figure shows a considerable increase in the negative bias. Against this, immediate support emerges at 0.6513, ahead of 0.6465. On the plus side, the initial obstacle is 0.6610 ahead of the 200-SMA of 0.6675, and 0.6754. The RSI rebounded to around 29.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
AUD/USD: Some contention seems to have emerged near 0.6500
Another day, another pullback in AUD/USD. This time the pair dropped to multi-week lows and approached the key 0.6500 support, always on the back of weak commodity prices and concerns surrounding the Chinese economy.
EUR/USD: Downside halted near the 200-day SMA
EUR/USD regained some balance and left behind two consecutive daily declines, advancing to the 1.0870 region following the indecisive price action in the US Dollar ahead of key PCE data due on Friday.
Gold challenges critical support
Gold remains under selling pressure on Thursday, trading near a fresh multi-week low of $2,357.92. The bright metal eased throughout the first half of the day amid a dismal market mood. Equities led the way, falling on the back of weak earning reports and a sharp slide in the tech sector.
SEC vs. Ripple lawsuit closed-door meeting could result in resolution, XRP hovers around $0.62
Ripple hovers above key support at $0.62 as traders await a resolution in the US Securities & Exchange Commission lawsuit. The meeting is scheduled to occur behind closed doors on July 25. According to pro-crypto attorney Fred Rispoli, the lawsuit against Ripple could end by July 2024.
Buying on a market decline
In today’s TradeGATEHub Live Trading session, Coach Dale inquires about the specific issues Michael Venezia was buying during the recent market decline. Dale also provides a detailed analysis of precious metals, sharing his insights on potential downside targets.